The Effect of Financial Reporting Quality on Relationship between Short-term institutional Shareholders and Business Strategies

Institutional investors have a sufficient incentive to encourage managers to improve the quality of financial reporting and disclosure and to monitor manager's behavior. The purpose of this study is to investigate the quality of financial reporting, investment horizon and trading strategy of institutional investors of companies listed on the Tehran Stock Exchange. This research has been conducted in 135 companies listed on the Tehran Stock Exchange that have been selected based on the systematic elimination method. Also, this research has been done based on the information contained in the financial reports of companies in the period of 2009 to 2018. The method used is regression based on panel data. The results of the study regression model showed that the quality of financial reporting has a significant and positive effect on the relationship between short-term institutional investors and trading strategy but short-term institutional shareholders are temporary investors pay more attention to current earnings in determining stock prices than to encourage managers to improve the quality of financial reporting and disclosure.